What Is Irrevocable Power of Attorney?
An irrevocable power of attorney is a legal document that gives one party, called an agent or attorney-in-fact, the power to make decisions for the creator, or principal. For example, a person who is given power of attorney may make financial decisions for the principal and even decide where he should live and who should care for him. This type of power of attorney is irrevocable, however, which means the principal cannot revoke or alter it if he changes his mind later. Since an individual may well have reason to change his mind, irrevocable powers of attorney are less common than those that can be revoked.
With most powers of attorney, the principal signs over control while he is of sound mind. He chooses to allow another person to make decisions for him, but retains the right to take back control of his affairs or name a different person his agent in a new power of attorney. He might do this, for example, if the agent he chose made poor decisions or if the agent's help was no longer necessary. He would not have this automatic right with an irrevocable power of attorney, however.
Sometimes an irrevocable power of attorney is not expected to continue indefinitely and includes a clause that ends the contract on a specific date. This means that if a person wants to create an irrevocable power of attorney giving another party financial control over his affairs, he may add a clause that ends the agreement after a set amount of time. Sometimes such clauses end the power of attorney situation once a particular condition has been met rather than on a specific date. In either case, these clauses are often referred to as "sunset provisions."
Since many people would rather retain the right to terminate a power of attorney if need be, many people reserve irrevocable powers of attorney for dealing with specific financial matters. For example, a person may want to give a broker or agent the power to control his assets in exchange for his exclusive service. This power may be granted as part of an overall contract and cannot be terminated by the principal unless the agent agrees to it. A person may also create an irrevocable power of attorney that stays in effect until the agent has sold or transferred the party's assets. At that point, a sunset provision may allow for the termination of the agreement.
Frequently Asked Questions
What is the difference between a regular power of attorney and an irrevocable power of attorney?
A legal document known as an irreversible power of attorney gives another person the right to act in your place in a specific situation. An irrevocable power of attorney, in contrast to a conventional power of attorney, cannot be cancelled or withdrawn by the person who made it. The person who drafted the instrument forfeits all power over the matter to the attorney-in-fact once it is executed. This kind of power of attorney is frequently used when the person drafting the instrument wants to guarantee that a specific subject is handled in a particular way and they do not want to have the option of changing their mind afterwards.
What benefits and drawbacks come with using an irreversible power of attorney?
The fact that an irrevocable power of attorney offers a high degree of certainty and predictability is one benefit of employing one. The person who drafts the instrument cannot later alter their mind or withdraw the attorney-in-facts once it is signed. This can be useful when the person drafting the document wishes to guarantee that a specific issue is handled in a certain way. Yet, using an irrevocable power of attorney has the drawback of limiting the principal's flexibility and capacity for an eventual change of heart. The person may not be able to revoke the power they gave the attorney-in-fact if the situation changes.
Which circumstances might call for the use of an irreversible power of attorney?
A person often uses an irrevocable power of attorney when they want to ensure that a specific subject is handled in a specific way and do not want to be able to change their mind afterwards. For instance, a person might give a family member ownership of a piece of property through the use of an irrevocable power of attorney, subject to the restriction that the family member cannot sell the property without the person's permission. In the event that the person's physical or mental condition deteriorates in the future, this would ensure that the property is not sold without their consent.
How can I establish a permanent power of attorney?
You will need to speak with an attorney who is knowledgeable about the legislation in your state in order to draft an irrevocable power of attorney. Your lawyer can assist you in drafting the agreement and make sure it complies with all statutory criteria for an irreversible power of attorney. You must also name the person you want to designate as your attorney-in-fact and outline the parameters of their power. As soon as the paper is written, you must sign it before witnesses and have it notarized.
What are a few crucial things to remember when utilizing an irreversible power of attorney?
While employing an irrevocable power of attorney, it's vital to keep in mind that after it's been signed, it can't be amended or withdrawn. When drafting the agreement, you should carefully assess if an irreversible power of attorney is the best option for your circumstances. Choosing an attorney-in-fact you can rely on to represent your interests and properly defining their authority in the contract are both crucial. Last but not least, you should be aware that an irrevocable power of attorney might have substantial financial and legal ramifications, so you should speak with a lawyer before drafting the instrument.
@Mor - I knew a family where there was a gene that meant that several of them would slowly lose their cognitive abilities, until they were essentially mindless. They all signed the irrevocable power of attorney form to put their legal rights into a family member's hands before the end was even close, because they knew by the time they were starting to lose their minds, it would already be too late.
I hope I'm never faced with that kind of situation, but unfortunately, it's a growing problem for everyone, since people live so much longer they have time to develop these kinds of conditions.
@MrsPramm - I can't imagine someone being able to assume a durable power of attorney over another person without there being a very good reason. The courts simply wouldn't allow it.
Usually it only happens when someone is basically dying in a hospice and can reasonably said to not be able to speak for themselves. Sometimes it happens when someone is intellectually handicapped, either by illness or accident and basically can't think for themselves.
No one is going to give someone the ability to assume this kind of power on a whim. If the person is of sound mind, this kind of thing probably isn't necessary.
It must be quite scary to have to take this kind of step. I've had to give general power of attorney to my mother before, when I was going overseas and would be out of communications reach for a while, and even that made me nervous. It's not that I don't trust her, but it is a very big step to allow someone that much power over you, particularly when you aren't there to defend yourself.
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